My firm acts as an introducing broker/dealer on a fully disclosed basis with multiple clearing firms. Can I qualify for the exclusion to OATS reporting under Rule 7410(n)?
If a firm routes orders in Nasdaq and OTC listed securities to more than one entity, the firm will not qualify for the exclusion under Rule 7410(n). For example, if a firm sends one category of orders to Clearing Firm A for further handling and execution and a second category of orders to Clearing Firm B for further handling and execution, the firm will not qualify for the exclusion under Rule 7410(n) because more than one entity makes routing or execution decisions with respect to the firm’s orders. However, in the example above, although the firm will not qualify for the exclusion to the OATS reporting requirements, the firm may establish an OATS reporting relationship with each of these clearing firms whereby the clearing firms will report OATS data to FINRA on behalf of the firm. Specifically, Rule 7450(c) permits firms to enter into agreements with Reporting Agents, pursuant to which the Reporting Agent agrees to fulfill the OATS obligations of the firm. In the example above, the
